Yahoo Touts Display Ad Gains in Q3, But Revenue Is Flat

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Double-digit growth in Yahoo's display ad revenue helped offset some declines in search revenues as it posted a 113 percent rise in operating income for the third quarter 2010 to $396 million. However revenue increased just 2 percent compared to the same period last year, to $1.6 billion.

During a conference call with analysts, CEO Carol Bartz noted the transition of its search operations to Microsoft and Bing remains on schedule, adding that algorithm-based search in the U.S. and Canada transitioned last month with paid search set to follow. But she conceded that over the short term search revenues have been negatively impacted as some advertisers waited to move to Microsoft adCenter.

Yahoo's real strength during the quarter was on the display ad side. The company reported a 17 percent Q3 revenue rise on its owned and operated sites to $465 million - though that was off slightly from the $468 million in display revenue from the second quarter of this year. While the company did report a 4 percent decline in page views - troubling for any portal - Bartz touted the company's continuing progress to better target and deliver the right audience to its advertisers.

She avoided any speculation on changes to Yahoo’s investment in China search company Alibaba, only noting that the two companies are committed to a productive business relationship.

On the mobile front, during the quarter Yahoo released seven new applications for the Android platform as well as updated the Yahoo home page for iPhone. It also introduced several new iPhone apps, including fantasy football and an updated Messenger that allows users to make voice and video calls over 3G and Wi-Fi networks from their Apple phone.

Yahoo CFO Tim Morse predicted that for the fourth quarter, display advertising revenue may not show the same momentum it has in recent quarters, but suggested that was more a function of the overall consumer uncertainty heading into this holiday season compared with last year.